Q1 (a): Performance of Sealed Air:

The performance is relatively improving if we just look at the profitability of the company in the year 1987 and 1988. The company is generating more net earnings in the year 1988 as compared to 1987. If we look at the levers of the company for both the years, it can be calculated by the product of few ratios which result in the return on equity for the company. The ratios which are crucial for the levers of the performance consist of net profit margin, assets turnover ratio and the financial leverage ratio. A variation in any ratio will deteriorate the performance of the company by changing the lever.

The net profit margin for the company for the year ended 1987 was 6.77% which has improved in the year 1988 and reached to around 7.32%. It means that the company is generating more profits after tax from its sales. Moreover, the assets turnover ratio of the company was 1.33 in the year1987, which has improved to 1.42 in 1988. It means that company was able to generate 1.33 dollars’ sales against the amount of each dollar spent on its assets and it has improved to generate $1.42 sales by spending$1on assets.

Financial leveraged ratio of the company is calculated by equity ratio, which shows the financing of the company through equity and through debt. The ratio shows that the company was financing through equity in the year 1987 at around 63% and 37% by debt whereas, in the year 1988 company has increased its debt financing by 1% and it has increased to 38% and equity financing to 62%.

Return on equity is the pillar for performance levers, which is calculated by taking the product of the above-mentionedratios, which is around 5.55% in the year1987 that has improved to 6.57% in the year 1988. However, the company’s ratio of return on assets and equity are calculated and it shows improvements in both the ratios. ROA has improved from 9 to 10% and ROE from 15 to 17% in the year 1988.

Sealed Air Corporation-Leverage Recapitalization Harvard Case Solution & Analysis

Efficiency ratios:

Moreover, the ratios of receivable turnover in days show that the company was able to recover its money from its customers within a period of 58 days in the year 1987 and it improved to 56 days in 1988 and 55 days in 1989. Receivable turnover in days has improved a lot.Payables in days were 40 days in the year1987, which means that the company was able to receive credit period of 40 days for the payment of its debt, and it has declined to 36 days in the year 1988 and further declined to 34 days in the year 1989.

The company’s efficiency ratio of inventory turnover was around 57 days, which shows that the company is able to complete its inventory cycle within 57 days in the year 1987. It has declined to 54 days in the year 1988 and 45 days in the year 1989, which means it has improved. It shows that the policy of company’s management of inventory and receivables is not effectively receiving favourable credit terms from its creditors............

This is just a sample partical work. Please place the order on the website to get your own originally done case solution.